Month: March 2012

It is apparent that people who do not have credit history find it tough to get approved for a credit card. Some of the people who fall in this slot are college students, people in low income groups and the ones with bad credit history. Here are ways in which you can apply for a credit card with no established credit history

1. Make sure you have a job – Even if you are a student under the age of 21; get a job if you want a credit card. What card issuers look for is the ability of the person to repay back the money. So if you have a job with decent income flow, they can give you a credit card with a modest credit limit, to begin with.

2. Get a student credit card – If you are a student, you may well be eligible for a student credit card. These are especially for college students who do not have a credit history or large income. But please bear in mind that the entail high interest rates and other fees.

3. Store credit cards – Retail store credit cards do approve credit card applications for those with no credit. But you may not get the reputed Visa and MasterCard brands. Secondly, the interest rates can be quite high and the credit limits may be low. So if you do get one, use it as a stepping stone to boost your credit profile, just use it less frequently and pay off your balance in full.

4. Secured credit cards – Secured credit cards are a good option if you want to have a credit card on the face of no established credit. Just pick the ones that will report to major credit bureaus and has low fees. For a secured credit card, you have to make a security deposit to get a credit limit. Aim to save your money for a few months in a security deposit if you do not have money outright. You can go for credit cards like Citi Secured MasterCard, Capital One Secured MasterCard and Orchard Bank Secured MasterCard which involve a minimum security deposit of $200. There is also the Capital One Secured MasterCard which entertains a security deposit to $49 or $99 and gives you a $200 credit limit.

5. Co-signer – Get a co-signer, who can sign for you on your credit card application. This may be your parent or your spouse. If you are not able to get a credit card o our own, you can make use of someone else’ good credit. You can get someone with a good job and good credit to apply with you. Though your application may be approved, there are things that you have to be in the know. The other person will be watching your purchases and even ensuring that you pay the credit back in full. This is because if you miss out your payment or go over the limit, the co-signer’s credit is also affected.

6. Do not apply many times –Too many inquires can hamper your credit profile, even before you build it. So, for instance, if your application for student credit is rejected, do not apply again. Instead apply for a retail store credit card or apply with a co-signer.

Things to note:

You may come across advertising gimmicks which talk about getting a credit card easily without credit history. Though some of them may have consumer interest in their mind, most of them have a catch in the form of high fees or high
interest rates or both.

The other thing that you can do is to take an alternative of credit card, which is a prepaid card. This is helpful only if you do not have a debit card and a checking account. Prepaid cards do not build your credit history; they just help you make transactions similar to the way a credit card would.

The temptation to get a new credit card always comes calling. While it may entitle you to new kinds of benefits, you do have to address the implications that the card will have on your credit score. If you do have a good credit rating- excellent or very good- then the implications of getting a new credit card do not hold so much gravity per say. But if you are struggling to raise your credit, it’s a decision that you might want to address in deeper detail.

The Good

There are two sides to applying for a new credit card, and both of these are addressed, starting with the advantages. Getting the new card can actually help you improve your credit score, but you have to be a disciplined shopper to gain this advantage. The goal is to drop your credit utilization, so that your credit score can increase. But this means not making new purchases with the card, which somewhat defeats the purpose of getting the card to begin with. However, if your primary goal is to raise your credit, it is the reality you have to put up with. If you absolutely must spend on the new credit card, make sure you use very little of the available credit. Around 10% is sufficient, since it will give you a good credit-to-debt ratio. Try to stay below a 50% credit limit, to avoid having a poor credit ratio.
The Bad

The disadvantages in this case do outweigh the advantages. You should not get a new credit card if your solitary goal is to increase your credit score. The risk is far too big, and besides, there are other ways to raise your credit score. That said, there are some hits that your credit score takes when you apply for a new credit card. The first is with your credit inquiries. Whenever you add a new credit card, a hard inquiry does show up on your report. The credit pull is made by the lender offering you the card. As long as your application is submitted, the credit inquiry will be made, even if you have not been approved for the card yet. So what does that mean? Well credit inquiries are a measure of your financial responsibility. When too many of them show up on your credit score, it is lowered, since they account for 10% of your total score.

Opening a new credit card will also lower your credit age. This is basically the length of time that has passed since you first opened up a line of credit. The rule is, the older your accounts are, the better credit score you will have. This in other words is to say that adding new accounts will lower your credit age, and this will result in a lower credit score.

In the end, you have to decide whether the new credit card is the best financial move to make. You should only apply it on a basis of need, not want.